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NEW QUESTION # 72
Which of the following elements would be included in a recommendation report to a client?
Answer: D
Explanation:
A recommendation report for a client should contain comprehensive details of their existing financial arrangements. This ensures that advice aligns with the client's goals and existing commitments. The inclusion of previous arrangements helps provide a full financial picture and ensures the recommendations are appropriate.
NEW QUESTION # 73
What causes the price of a closed-ended investment company to trade at a premium or discount to net asset value (NAV)?
Answer: A
Explanation:
* Price of Closed-Ended Investment Companies:
* These companies issue a fixed number of shares. Prices can trade at a premium or discount to NAV based on market demand and supply for their shares.
* Strong demand increases prices above NAV (premium), while weak demand decreases prices below NAV (discount).
* Elimination of Other Options:
* A: Charges affect long-term returns but not immediate pricing.
* B: Tax status is generally consistent and not a determinant of premiums or discounts.
* D: Interest rates indirectly affect demand but are not a direct cause.
References:
* ICWIM Module 3: Discussion on pricing mechanisms of closed-ended funds and NAV premiums
/discounts.
NEW QUESTION # 74
The supply curve for an industry would be expected to shift to the left if:
Answer: D
Explanation:
The supply curve shifts left when production becomes more expensive or difficult.
* Why Does a Leftward Shift Occur?
* Increased raw material costs make production more expensive, leading to a reduction in supply.
* Higher wages, taxes, or stricter regulations can also shift the supply curve left.
* What Causes a Rightward Shift?
* Technological improvements lower costs and increase supply.
* Lower raw material costs reduce production expenses, encouraging more supply.
# Reference: CISI Wealth & Investment Management (Economic Principles), Microeconomics - Supply & Demand.
NEW QUESTION # 75
Which of the following is a money laundering offence?
Answer: C
Explanation:
Money laundering is the process of disguising the origins of illegally obtained money to make it appear legitimate. Concealing assets derived from criminal activities is a criminal offence under anti-money laundering (AML) laws.
* Definition: "Concealing" means hiding or disguising the true nature, location, source, ownership, or control of funds derived from criminal activity.
* Legal Framework: The Financial Action Task Force (FATF) and UK Proceeds of Crime Act 2002 (POCA) classify "concealing" as an offence.
* Three Stages of Money Laundering:
* Placement: Introducing illicit funds into the financial system.
* Layering: Concealing the source via multiple transactions.
* Integration: Reintroducing "cleaned" funds into the economy.
# Reference: CISI Wealth & Investment Management (AML), FATF Guidelines, UK POCA 2002.
NEW QUESTION # 76
For what reason is holding bearer shares potentially disadvantageous?
Answer: D
Explanation:
Bearer shares are physical certificates that grant ownership, and the rights to those shares are with the bearer.
If the certificate is lost or stolen, the investment could effectively be unrecoverable since ownership cannot be traced back to the investor.
* Not being publicly named (A): This is an advantage of bearer shares, not a disadvantage.
* Difficulty in valuation (C): Bearer shares' value is similar to registered shares based on market conditions.
* Impossible to sell part (D): Fractional transactions can still occur with bearer shares.
References:
* International Certificate in Wealth & Investment Management: Risks associated with different forms of equity ownership.
* Legal frameworks around bearer shares and their potential misuse in financial systems.
NEW QUESTION # 77
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